As Venezuela Prepares to Dump Dollar, Caracas Moves to Repatriate Gold from Bank of England

Venezuela is looking to repatriate 14 tonnes of gold from the Bank of England as US-led sanctions target their international assets, Reuters has reported.

The move, which will bring around US $550 million of international reserves back under Caracas’ control, was initiated two months ago by the Central Bank of Venezuela (BCV), according to an unnamed official source. No official statements have been made by either the BCV or the Bank of England, who cite client privacy rules for their silence.

According to the sources, the gold is yet to make the journey back to Caracas as the BCV is still organising insurance for the trip. “The insurance is still being sought, it is very costly,” the news agency was told.

Sintesis Financiera economist Tamara Herrera claims that the measure is a direct response to US and EU sanctions which have frozen a series of Venezuelan bank accounts and assets.

“This decision to bring the gold back [to Venezuela] shows the preoccupation which the government has of a potential asset-freeze if sanctions increase,” she told Reuters.

The UK’s conservative government has supported EU sanctions and imposed its own separate arms embargo on Caracas this year. They have also increasingly made interventionist statements regarding the country, including not recognising the May 20 presidential election result.

The reported initiative follows a recent trend by Venezuela to take back control of its national reserves and move away from US- and dollar-controlled financial institutions.

Ex-President Hugo Chavez repatriated 160 tonnes of gold between 2011 and 2012, most of which were located in vaults of the USA and Europe. Internationally held reserves are often used as collateral for loans, trade deals, or to manage international payments.

Recent BCV figures indicate that Venezuela currently has US $8.7 billion in international reserves, two-thirds of which are held in gold bars.

The US announced further sanctions against Caracas this week, which target its growing gold trade. President Maduro described the measures as “crazy” and “criminal” whilst declaring that Venezuela is sitting on the world’s second largest gold reserves.

The latest sanctions add pressure to an already isolated Venezuelan government, which has denounced that previous US sanctions, which target financial transactions and debt, have blocked or delayed vital international payments for medicine and food imports.

EU extends sanctions

Following Washington’s announcement, the European Union also voted to extend its sanctions against the Caribbean country this week.

The European Council voted in favour of extending existing sanctions, which do not include those targeting the gold trade, for one year, due to what it describes as “the continuing deterioration in the Venezuelan situation.” The European body added that these measures are “intended to bring political stability to country.”

Whilst the EU is yet to levy financial sanctions on Venezuela, it has alongside Switzerland, targeted a number of high-level functionaries, including President Maduro, and imposed an arms embargo.

As a response to US and EU sanctions, Maduro’s government has increasingly looked to trade and secure credit from countries not aligned with the US, such as China, Russia, and especially in the case of gold, Turkey. In July this year, Venezuela sent a significant part of the 9.1 tonnes of gold produced in Venezuela during the first six months of 2018 to Turkey for refining. In September a further US $900 million worth of gold was sent for refining, upon which it will be returned to the BCV.

“[The gold certification] we use to do in Switzerland, and now we don’t,” stated Ecological Mining Minister Victor Cano in July. “We will do it in allied countries because imagine if we sent the gold to Switzerland and then we were told that it is to stay there because of sanctions,” he continued.

Venezuela is also looking to switch trading currencies away from the US dollar to Euro, Yuan, or cryptocurrencies such as the Petro, which became available to all Venezuelans this Monday as a savings plan. This follows a recently announced gold savings plan for Venezuelans, as the government attempts to offer stable savings as a way of combating hyperinflation in the country.

Top Photo | Gold bars sit inside a military plane before being taken to Venezuela’s Central Bank, at Carlota military airport in Caracas, Venezuela. Ariana Cubillos | AP